BUILD TO RENT

Scottish Market Review Summer 2020 BUILD TO RENT IN SCOTLAND

BTR STRENGTHS SHINE THROUGH THE DARKNESS SCOTLAND BTR BY STAGE Operating Pre-Planning There can be no doubt that 2020 has been From a market perspective, there can be no 4,492 564 homes 231 homes an unusual year, with the property sector doubt that BTR, much like the wider PRS, On Hold experiencing a particularly acute impact. The is going to be facing a difficult short-term GLASGOW 571 homes effects of lockdown are set to have long lasting outlook. There are likely to be delays in the In Planning HOMES implications from the individual household level delivery of planned developments. However, Planning 3,421homes BY STAGE to societal issues of housing supply. During the weaknesses in the sales market, constrained Approved Covid-19 outbreak, the Private Rented Sector new housing supply, as well as potential 3,127 4,154 homes (PRS) has made many headlines, as the nature challenges for affordability and lending in of the landlord tenant relationship once again the wake of the lockdown, may attract new comes under scrutiny. With over 350,000 PRS households to the BTR sector. In addition, households in Scotland, the sector plays a if there is a lasting economic downturn and crucial role in the country’s housing system. weak house price growth, then the financial During lockdown many of the accepted housing attractiveness of buying could wane, leading to assumptions and practices have been tested. a rise in rental demand. In the wake of the 2008 1,094 Against this backdrop, the Build to Rent (BTR) Global Financial Crisis, with lending retreating service and delivery models have emerged as and a stagnant sales market, the PRS tenure ABERDEEN offering clear advantages over the traditional increased 5 percentage points across Scotland, landlord. 6 percentage points in Glasgow and 10 percentage points in Edinburgh. • In dealing with the most pressing human issues relating to Covid-19, the centralised Looking ahead, new BTR supply is still slowly 228 management of BTR properties and BTR progressing and has not yet translated into services have offered practical advantages high volume homes to occupy. However, new DUNDEE in the lockdown. funding announcements for Moda Living’s • High speed broadband enables effective Springside development in Edinburgh by homeworking. Apache Capital Partners and alternative real ABERDEEN (1,094 homes) • Delivery lockers and cool rooms allow asset investment firm Harrison Street, and the contactless delivery. new BTR scheme at Distillers House in Glasgow, 8,941 • Centralised management allows for easier are examples of continued confidence in the SCOTLAND TOTAL cleaning and repairs. sector. • Existing communications channels with residents and neighbourhood community groups have enabled tenants to be kept up to date and remain socially connected.

With mental health, as well as physical health, being a major concern during lockdown, it is DUNDEE (228 homes) important to maintain community connections. At Rettie & Co we have seen a marked increase in usage of our resident portal and engagement in community forums, something we hope will continue. GLASGOW (4,492 homes) The institutional nature and professional management of the BTR offering has also given us the ability to provide advice and information to residents in regular and timely communication, as well as individual assistance and signposting for anyone facing hardship. This has enabled us to maintain a 98% collection on rent roll, showing Gillian McLees EDINBURGH (3,127 homes) BTR to be a robust investment during the most Head of BTR Operations difficult of times. [email protected]

RETTIE & CO. 3 POTENTIAL SUPPLY ON THE RISE INVESTMENT FOCUSES IN TWO CITIES

The BTR sector in Scotland has mixed use scheme including over 900+ between 300 and 700 units. The inceased embryonic nature of the sector, which Top 5 BTR Providers in Scotland by Units and City continued to grow over the past 12 BTR homes as part of a 1 million sqft density of schemes in Glasgow can drive has probably contributed to some months, with more schemes being commercial development. The variety economies of scale. nervousness to ‘push the button’ on approved or progressing through the of schemes being considered shows a number of schemes. The current Dandara planning system. This has included a the range in BTR investment in the It is notable that there has been less Covid-19 pandemic and continuing number of new developments electing Capital, where site availability remains a supply emerging in Aberdeen and concerns about the future political and to choose BTR as the solution or partial constraint. The most visible sign of this Dundee, where challenging market economic outlook in the UK and Scotland solution for their sites. Announcements confidence has been the recent funding conditions and the size of the market, will only augment such nervousness and PLATFORM_ of new schemes in both Edinburgh and confirmation of Moda’s Springside have made it more difficult to attract the caution. Glasgow over the last year demonstrates development by Apache Capital and same level of funding interest. However, the interest and confidence in the BTR Harrison Street despite the economic in Aberdeen, Dandara is progressing their However, there is tangible progress MODA Living sector in Scotland, despite current uncertainty arising from the Covid-19 Triplekirk scheme in the city centre, which now happening and once schemes headwinds. This confidence has seen lockdown. will deliver over 340 units. start getting out of the ground and the overall pipeline in Scotland increase demonstrate viability, a surge in activity is Get Living by over 1,500 units, from 7,236 units to Glasgow has seen a continuing expansion Overall, while the Scottish BTR sector is still expected. A notable change this year 8,941 units since our previous Briefing of proposed BTR schemes, with site continuing to grow in terms of pipeline, has been the fall in the number of units Edinburgh last Summer. availability in the City Centre less delivery looks constrained with the in the planning system, which is down Dundee constrained than in Edinburgh. The total number of operating units still only in from over 2,000 units. This reflects the L&G Glasgow Aberdeen In Edinburgh, prominent schemes, such number of BTR units in the city’s pipeline the hundreds nationally. It does take major schemes progressing through the as New Town North by Ediston, located in continues to rise and is now almost 4,500 time to develop sites, especially large- planning system and gaining approval. 0 500 1,000 1,500 the prestigious New Town, will bring BTR homes. Again, in contrast to Edinburgh, scale strategic sites where the bulk of With the first wave of BTR schemes now Source: Rettie & Co. to a prime central location. Parabola’s the majority of the planned BTR units in the pipeline is located, and the market through the system, there are a number bold masterplan at will Glasgow are in large-scale masterplans lacks the benchmark evidence available of other schemes considering BTR and on deliver a new neighbourhood, with a and higher volume schemes typically for other property classes given the the brink of entering the planning process. Top 5 BTR Providers in Scotland by Units and Stage

Many of the major BTR players have now Dandara Pipeline of BTR Homes by City secured some exposure to either one or 4,492 BTR PIPELINE both main Scottish markets. In terms of 4,500 Completed / Operating operators / developer, Dandara currently PLATFORM_ 4,000 On Hold retains the largest BTR pipeline, with high Planning Approved BY CITY volume schemes in Dyce, Aberdeen 3,500 In Planning and Glasgow. Dandara also remain the 3,000 Pre Planning 3,127 only provider currently operating BTR MODA Living 2,500 at scale in Scotland. PLATFORM_ have 2,000 moved into second place, with their plans 4,492 to significantly increase the volume of 1,500 Get Living 1,094 units being delivered at the Former John 1,000 GLASGOW Lewis Depot site in Edinburgh. Moda, with Completed Planning Approved 500 228 their sites at Springside in Edinburgh and L&G In Planning 0 Holland Park in Glasgow, have the next Pre Planning Aberdeen Dundee Edinburgh Glasgow largest pipeline of units in the Scottish market. Source: Rettie & Co. 0 500 1,000 1,500 3,127 Source: Rettie & Co. In terms of funding, L&G have been active Pipeline of BTR Homes by Stage with major schemes at Buchanan Wharf EDINBURGH in Glasgow and Skyliner in Edinburgh. This Value of Build to Rent Construction Contracts 4,500 Edinburgh and other investment means that the total Dundee £700m Planning Approved 4,000 value of construction contracts for delivery In Planning Glasgow of BTR units in Scotland now exceeds £1 Aberdeen £600m Pre Planning 3,000 billion, with more than half of that figure 2,500 1,094 concentrated in Glasgow. £500m 2,000 ABERDEEN There are a number of other schemes, £400m 1,500 especially in Edinburgh, which are now £300m considering BTR as a possible strategy. If 1,000 these sites progress, then the pipeline of £200m BTR units in Scotland looks set to continue 500 £100m to expand and Edinburgh should narrow 0 228 the current gap with Glasgow over the £0 Pre - In Planning Completed/ On next year. Glasgow Edinburgh Aberdeen Dundee Planning Planning Approved Operating Hold DUNDEE Source: Barbour ABI Source: Rettie & Co. RETTIE & CO. 5 GLASGOW

Speirs Wharf Glasgow Harbour Beith Street

Holland Park

Love Loan Merchant Point Central Candleriggs Quay Distillers Court House

City Wharf Buchanan Candleriggs Wharf Merchant City

Speirs Wharf Beith Street Central Quay City Wharf Distillers House Buchanan Wharf Holland Park Love Loan Candleriggs Merchant City Merchant Point Candleriggs Court Glasgow Glasgow Glasgow Glasgow Glasgow Glasgow Glasgow Glasgow Glasgow Glasgow Glasgow Glasgow

Hoxton KR Developments PLATFORM_ Dandara Brickland Ltd Drum / L&G Moda / Apache Chris Stewart Group Drum / Stamford Get Living Structured House Aberdeen Standard 202 BTR Homes 425 BTR Homes 498 BTR Homes 600+ BTR Homes 182 BTR Homes 300+ BTR Homes 433 BTR Homes 136 BTR Homes 300+ BTR Homes 700+ BTR Homes 230+ BTR Homes 36 BTR Homes Formerly planned This planned PLATFORM_ are This scheme will Recently announced, Buchanan Wharf This landmark Located between The site has an This 7.5 acre site Formerly planned A boutique for student housing, development is looking to build on deliver over 600 the proposed is a major mixed sixteen storey Martha Street and existing planning has the potential for student housing, development of this scheme located on the banks their 608-unit UK BTR apartments scheme at Distillers use development development will George Street, consent for to deliver the most the Merchant Point 36 units located in designed by Stallan- of the River Kelvin portfolio with this in 2 blocks up to House at 64-72 on the southside deliver 433 prime this mixed use site around 850,000 sqft BTR homes in a scheme has gone the Merchant City. Brand architects and will comprise 2-acre £100m GDV 16-storeys. The Waterloo Street will of the River Clyde. rental apartments will include a new of commercial, hotel, single scheme in back to planning to The development has gone back to 4 blocks between scheme, which will development is provide 182 one, The site will provide into Glasgow, 245-bed hotel, student, “for sale” Scotland. The scale deliver a mix of BTR comprises 1, 2 planning to propose 9 and 15 storeys. deliver apartments located close to two and three bed more than a million revitalising the office space, leisure and BTR apartments, of the development, homes, office space and 3 beds, with 203 apartments The ground floor overlooking the City Centre BTR apartments in square feet of prime City Centre. The and active ground delivered alongside location, and Get and retail space. 80% 2 beds. The over 2 blocks of 20 will contain a mix of the River Clyde, in an area set to Glasgow City. The Grade A office scheme will include floor along a newly retail on the ground Living’s track record The current site development is and 13 storeys. The retail, restaurant and developed around change through scheme has been space, residential a roof-top terrace, created lane. In floor. Having lain of delivering volume extends to 1.1acres, completed and scheme will include cafe space, as well a central courtyard. development and developed by Ryder accommodation resident’s lounge, addition, there will derelict for over sites across the with current plans operating with full cafe, gym, rehearsal as a riverside walk. Amenity in the benefitting from Architecture on and a mix of local concierge, cafes, be 136 BTR homes a decade, this UK, provide the proposing 14 occupancy. space and roof development will strong connectivity behalf of Brickland amenities and bars and health as part of the is an important potential to create storeys. terraces. include a concierge within the city. Ltd. landscaped public facilities. development. development site in a new residential and gym. spaces. the City Centre. destination.

RETTIE & CO. 7 EDINBURGH

Skyliner

John Lewis Depot

McDonald Rd

New Town North

Springside Freer Street Quay India Quay

Newbridge Village Edinburgh Park

Newbridge Village Edinburgh Park India Quay Freer Street Lochrin Quay Springside McDonald Rd Skyliner New Town North Former John Lewis Depot Edinburgh Edinburgh Edinburgh Edinburgh Edinburgh Edinburgh Edinburgh Edinburgh Edinburgh Edinburgh Newbridge Residential Parabola Edinburgh Living Vastint Aberdeen Standard MODA Living Kingsford S1 / L&G Ediston PLATFORM_ 161 BTR Homes 1,180 BTR Homes 259 BTR Homes 175 BTR Homes 113 BTR Homes 460+ BTR Homes 75 BTR Homes 253 BTR Homes 150 BTR Homes 527 BTR Homes A residential-led The Edinburgh Park This site, controlled This mixed-use This scheme, which This flagship This boutique Previously planned The New Town The 4.8 acre site was masterplan located to masterplan contains by Edinburgh scheme, which will was acquired by scheme, at for sale, Skyliner North development previously under the West of Edinburgh. a mix of uses Council, will anchor include a hotel, BTR Aberdeen Standard development has the former Broughton emerged with a will see up to 350 offer to Artisan The development will including 1m sqft of the Fountainbridge and commercial Investment for now been approved. High School building, forward funding homes, premium Real Estate and has be mixed tenure with commercial space, a masterplan and is space, is £27.5m, has found The scheme will includes gym, a roof deal from L&G for office space and a planning for 220 an element of BTR to civic square, medical anticipated to start progressing through strong demand and deliver high quality, terrace, a club room BTR and now has hotel replace the units. PLATFORM_ be included alongside facilities, conference work on-site this planning and is set is at full occupancy. high volume BTR and co-working planning approval. existing 1970s office have submitted a private for sale and facilities, leisure and year. to continue the product to the city. space, with current block, formerly new higher density MMR units. recreation as well as expansion of the rents from £875 pcm. home to the Royal scheme to increase over 1,700 homes. Lochrin Basin. Bank of Scotland. the number of units from 220 to 527.

RETTIE & CO. 9 EDINBURGH vs GLASGOW

Understanding market affordability and Taking the average earnings in Edinburgh depth of market are key components to Distribution of Rents by City and Beds of just under £34,000 and comparing it to Average Household Earnings vs Average Rent the successful placement of BTR product 40% 40% Edinburgh the average advertised rent in the city in 50%50% Edinburgh within a local market, as is understanding 1 Bed 2019 of £1,134 pcm, provides a gross rent Glasgow 35% 35% the changing values within the market. 2 Bed to income ratio of 40%. This is materially 40%40% With many investors and developers 30% 30% higher than the Glasgow average of 3 Bed 30%30% considering both Edinburgh and Glasgow 25% 25% 35%. While a blunt proxy for affordability, for BTR development, the different both cities have seen this ratio extend by 20%20% dynamics within each market and change 20% 20% 1 bed around 2 percentage points over the past over time are important considerations 15% 15% 2 bed four years. 10%10% % of Market when determining viability. Income Rent vs 3 bed 10% 10% The distribution of earning and rents, and 0%0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 The comparative distribution of rental 5% 5% their change over time, across a city can 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 values by the number of bedrooms shows be more telling. The two maps on the right Source: ASHE / Citylets marked differences between Edinburgh 0% 0% show the average rent of 1- and 2-bed Edinburgh Glasgow 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 and Glasgow (see right). In Edinburgh, Rent (£ pcm) flats in 2019 against the earnings in the not only is the average rent ahead of the local area. This provides a ratio of rents Edinburgh Rental Affordability (2019) equivalent in Glasgow, but there are a against gross earnings to give an indicator 35% 35% Glasgow greater number of lettings at higher price 1 Bed of affordability at a local level. Average 1&2 Bed Rent as % of Average Household Earnings points. This depth of higher value rentals 30% 30% 2 Bed supports a different pricing strategy. The maps of Edinburgh and Glasgow 10% 40% 25% 25% Comparing the advertised rent at the 3 Bed show areas in red, where average 90th percentile for 2-bed apartments in 20% 20% households are paying a higher proportion both Edinburgh and Glasgow reveals a of their income to afford the average cost 15% 15% difference of £300 pcm between the two of a 1-or 2-bed apartment. While certain cities, or 30%. At the median rent, the 10% 10% patterns may be expected, such as higher difference narrows slightly to 27% but still % of Market rental values and expenditure occurring 5% 5% equates to a £200 pcm difference. in city centres, there are more subtle 0% 0% changes at a neighbourhood level. Another key aspect of the two markets 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 has been rental price growth in recent Rent (£ pcm) In Edinburgh for example, over the past years. Between 2015 and 2019, the 5 years, rising rents and demand in the median advertised rent in Glasgow Rent Decile by City for 2 Bed Apartments city, with the associated loss of stock to has risen by around 15%, or 3.6% per £1,4001400 Edinburgh the short-term rental sector, has seen annum. In Edinburgh, the median rent 2015 demand displaced to neighbouring £1,2001200 2019 has increased by 21%, or almost 5% per areas, resulting in sharply rising rents in annum. In addition, market growth has not £1,0001000 these neighbourhoods. This has meant Source: Scottish Gov. / Citylets been consistent across price brackets, that areas that might still be considered £800800 with the strongest growth in Edinburgh relatively affordable within the city context Glasgow Rental Affordability (2019) being in the upper half of the market, while, £600600 have become less affordable to residents. in Glasgow, the strongest growth has This includes areas such as Dalry and Average 1&2 Bed Rent as % of Average Household Earnings £400400 occurred in the middle market between . 10% 40% the 40th and 60th percentiles. £200200 In Glasgow, similar gentrification pressures This change in average rents has also £00 have resulted from rising demand. With 1010 2020 3030 4040 5050 6060 7070 8080 9090 been accompanied by changes in Decile prime demand focused on the West End, average earnings in both cities, which has Finnieston to the south has seen a rapid implications for affordability. The average £1,2001200 Glasgow gentrification in recent years with new wage in Glasgow has risen by 9% over 2015 build development and new bars and the past four years, lagging rental growth £1,0001000 2019 restaurants. This has pushed up rent levels of 15%. In Edinburgh, wages have risen in this area too. However, affordability £800800 faster (up 14% between 2015 and 2019), pressures are clearly not as significant in but rents have also outstripped wage £600600 Glasgow as they are in Edinburgh. growth here (by around 6 percentage points). This trend of rents outperforming £400400 For BTR development, where lead-in average earnings is common in most UK times to full occupation may take years, geographies but has had implications on £200200 understanding the patterns and change measures of affordability. within a city can make all the difference £00 1010 2020 3030 4040 5050 6060 7070 8080 9090 in terms of capturing the upside and Decile reducing development risk. Source: Scottish Gov. / Citylets RETTIE & CO. 11 A YEAR OF CHANGE

2020 will be known as the year of the Covid-19 afterwards. Rents were also depressed for a Short Term Listings in Edinburgh Q1 2017-Q1 2020 pandemic. While people may scratch their time after the 2008/09 market crash but did heads a little in years to come about what surge afterwards due to the demand/supply 14k happened in 2018 or 2019; 2020 will be one of imbalances. 12k those years that everyone will remember. This 11,186 year and its aftermath will produce profound For investors taking a long view on returns, 10k changes in the economy and wider society. the pandemic will be a blip on a chart but the It will also create and accelerate shifts in all short-term impacts cannot be overlooked, 8k property markets. In turn, there will be knock-on especially for those making decisions now on effects and impacts, many unexpected. The development and investment. At Rettie & Co, 6k

property world we are looking at now will be very we will continue to track the market and its key of Listings Count different in ten years’ time. drivers closely so that we can inform our clients 4k of changes and their impacts. In the wider private rented sector, we are Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2017 I 2018 I 2019 I 2020 already seeing some significant changes. The By offering flexible accommodation, BTR has Source: Airdna short-term let accommodation market has the ability to pivot to meet new needs arising been seriously impacted by the pandemic and from the pandemic, particularly around people’s accompanying lockdown. Airbnb listings have requirement to work from their home. BTR is Households in the PRS in Edinburgh , Glasgow & Scotland dropped by 39% in the city from Q4 2019 to also showing itself to be adaptable, for example May 2020. With the tourism market likely to be in its move to suburban locations. This type of 35% Scotland one of those most detrimentally affected, the flexibility will be needed to beat the worsts of Edinburgh 30% Glasgow downturn in the short-term let sector does not the recession. 25% look like a passing phase. Many properties have 25% already shifted to long-term (traditional) rent, 20% 19% which has boosted supply in the sector. The number of listings on Citylets in Edinburgh, for “For investors taking a long view 15% 14% example, has risen by 28% year-on-year in the on returns, the pandemic will be a 10% first four months of 2020 and will likely see rents blip on a chart but the short-term % of Households drop back until demand recovers. 5% impacts cannot be overlooked...” 0% Over the medium to longer term, the case for BTR still looks solid in Scotland. The country 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 has an increasing population and the size of its Source: Scottish Households Survey private rental sector has expanded considerably in the last 20 years, particularly in the main cities, with very little existing professional BTR 3 Year Average Rent Compound Average Growth Rate activity. There are also growing numbers of skilled young workers in cities like Edinburgh 8% Scotland Edinburgh and Glasgow who do not want to be ‘mortgage 7% Glasgow prisoners’ but desire quality accommodation in 6% central locations. 5%

However, there will be short-term effects for 4% 3.7% BTR in Scotland as there will be for all property 3%

classes. Specifically, the increased supply of 3 Year CAGR 2.3% long-term rented accommodation will create 2% 1.8% more competition and likely reduce rents for 1% a time. Rents in Scotland’s two main cities had 0% been growing at around 4-6% per year in recent Dr John Boyle years but that looks like being reversed in 2020 Director, Research and Strategy 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 and any pick-up may take another year or two Rettie & Co. Source: Citylets

RETTIE & CO. 13 Balcony View at Edinburgh Park New Station Square

INDUSTRY VIEW: TONY HORDON

The development of Edinburgh Park to As is widely accepted, BTR provides a Edinburgh Park is designed to function date has been almost entirely focused viable solution to the housing crisis and, as a whole, with an emphasis on on offices, with approximately 1.2 given the housing needs in Edinburgh, it increasing travel by public transport million sq ft of office space, together will be a long-term component of that and on creating an increased sense with two budget hotels. As the owner market. Edinburgh has experienced a of community and amenity through of the remaining 43 acres of land to population growth of 13.1% over the the proximity to public spaces. the south of Edinburgh Park, we always last 10 years and as a response, the city These groupings allow a high- recognised that in addition to creating is beginning to pick up the pace in terms quality residential environment to be new, high quality office and commercial of the number of BTR developments maintained, whilst proximity to the space, creating a new quarter of the city across the capital. It is catching up on its commercial development ensures would involve developing homes for this rival in the west that already dominates the mixing of the residential and new community. the Scottish market. commercial communities to create an attractive ambience and to support The vision for Edinburgh Park that The BTR product and location have amenities on the Park. The masterplan Parabola has being pursuing is focused to work in tandem and we consider brings a high-quality landscaped on well-being and sustainability. At that the attention to design quality city centre urban feel to a suburban the core of our ambition is creating that Parabola champions will ensure location, creating more human formal a new type of development – a new that Edinburgh Park’s BTR will be and informal spaces, art and bringing community designed around the an exemplar in the city. Thoughtful together a range of building uses happiness and success of its people. planning and intelligent design, employing high-quality architecture. combined with high quality materials, Roof Gardens Street View Parabola is aiming to break new public realm and optimising daylight, Edinburgh Park will represent a residential ground. Edinburgh Park will sunlight and views, will result in the BTR new zero carbon urban quarter for have over 1700 new homes – of various product at Edinburgh Park leading the Edinburgh. Its development is a once- types and tenures complemented by market. in-a-lifetime opportunity to create supporting amenities and facilities in a a new urban quarter for the city, for crafted parkland setting. In designing the buildings for the site, people to live, work and enjoy the arts. Parabola and their professional team BTR will be an important component in As part of the evolution of our have focused on offering a high quality ensuring that Parabola delivers a master vision, the development team, led of design and finish with exceptional plan for Edinburgh Park. Our innovative, by Peter Millican, Parabola’s founder landscaping and resident amenities, bespoke BTR product will meet and chairman, set out to explore fully embracing the customer centric residents’ desires for a great place to and evaluate the very best in class ethos of BTR. Masterplan design is by live and for a new community to thrive. worldwide. Our study tours have been Dixon Jones, with the design of the We look forward to seeing this created highly influential in terms of the vision, BTR accommodation at Edinburgh at Edinburgh Park – as Parabola’s vision design and focus of Edinburgh Park. We Park being led by HTA architects and is realised. have examined housing exemplars in Sutherland Hussey Harris. Amsterdam, Basel, Zurich, USA and the UK in order to finalise our masterplan. As a team, we are passionate about The relevance of Edinburgh Park as a making positive commercial and major residential settlement, within social impact. We are committed to the context of the Edinburgh market, building a new, thriving community is based on four core attributes; and architectural exemplar loved by Night View Station Square accessibility, employment, amenity and its citizens, with real and long-lasting design. financial, cultural and social value. The BTR homes at Edinburgh Park offer an Early in the development of the vision important component in ensuring our for the residential aspect of Edinburgh commitments are delivered; providing Park, it was recognised that BTR would 25% affordable housing on-site, in a play an important role in delivering the way that is viable, well-integrated and quality homes that we are committed tenure-blind, and incorporates a range to building. Our proposals set out 1,180 of approved tenures, BTR homes at Edinburgh Park.

Tony Hordon Managing Director Parabola

RETTIE & CO. 15 Buchanan Wharf, Glasgow

INDUSTRY VIEW: DAN BATTERTON

Legal & General’s Build to Rent (BTR) Last year, we committed to fund the providing ‘alternative’ furniture packs, Fund are committed to providing high development of 324 BTR apartments to include a home office set up for quality rental homes across the UK. in Tradeston, as part of the wider, one additional habitable rooms within larger Fundamentally targeted at the ‘mass- million sq ft, mixed-use redevelopment apartments. market’, this does not preclude a site to include the Barclays Bank broader demographic from enjoying our campus. The homes will be delivered Such long term investment and asset product; indeed our residents range in in Q2 2022 and will be a mix of studio, management in a given location age from 0 to 70+, which have included one, two and three bed apartments. As requires careful consideration of the 3 home births. By collaborating with local with all of our developments, there will current and future prospects of the authorities from an early stage, we have be a key focus on amenity areas, which location. Covid-19 has created greater been successful in entering long term are carefully planned to accommodate near term uncertainties but the need partnerships that complement our long areas for flexi-working, in addition to for good quality well managed rental term investment target. games and lounge areas. As we see an accommodation to support growing increase in working from home, we will cities remains. Our desire to input into design process also look to provide the best internet and to closely manage the project connectivity in the city. We are seeking throughout the development phase to invest further in Glasgow and means that we will be able to handover Edinburgh this year. “In light of the current an optimal product to our operations pandemic and shifts in function, which is fit for purpose for With our aims so clearly focussed working patterns and the existing local rental market and on resident satisfaction, we have for efficient long term management. carefully considered all aspects of the behaviours, we are assessing Fundamentally there is a lack of quality rental experience within our buildings. ways to maximise ‘work from housing for rent, to that extent, we Apartment layouts are designed to home’ options. “ consider that BTR will significantly accommodate our bespoke furniture Skyliner, Edinburgh improve on the existing rental pack, typically provided in up to 90% experience that is currently available in of the apartments, although residents a particular authority and increasingly as are always given the option to rent evidence is available policy makers seem unfurnished homes. Our 24-hour staff to agree. members are receptive and responsive to customer requests/suggestions and Scotland is a key location for us, we are constantly exploring ways to particularly Edinburgh and Glasgow. improve our offer. All our on-site staff Both are vibrant and interesting cities, receive a customer service training with ambitions for redevelopment course designed for BTR and delivered and regeneration. Further, both have by airline first class cabin crew. We can set targets for reducing carbon design and build the most amazing emissions, which aligns with our own spaces but personal experience will aspirations. Edinburgh is one of the always rank as more important. most desirable cities to live in, with an affluent rental population and is well In light of the current pandemic placed to take advantage of growth and shifts in working patterns and industries, particularly tech. Backed by behaviours, we are assessing ways to local government, Glasgow has seen maximise ‘work from home’ options. significant investment in the City Centre, As well as increased provision of Dan Batterton with finance companies in particular working space in the amenity areas, Head of Build to Rent opening large-scale operations. we are looking at the options of Legal & General

RETTIE & CO. 17 THE DIFFERENT POLITICS OF SCOTLAND BTR SUPPLY & SUBURBIA

Anyone doing business in the BTR sector in increases compared with RPZs and to increase The past year has been a positive period for With an increasing number of families and Scotland needs to be aware of the different the availability of information about rent levels. BTR schemes progressing through the planning mature households electing to remain, or legislative landscape that now exists here. BTR This Bill has now been lodged at the Scottish system and nearing delivery. The Scottish pipeline return to the in the rental sector, future tenancies would be Scottish Private Residential Parliament and its progress is one to watch. has risen to almost 9,000 units, although only a demand appears strong. If a similar proportion Tenancies (SPRT) and come under the terms of small percentage are operational. This increase in of suburban BTR schemes were delivered in the Private Housing (Tenancies) (Scotland) Act In addition, there is also the local authority pipeline has seen the proportion of BTR units, as a Scotland as in England, then combined with the 2016. politics to consider. In Edinburgh, for example, percentage of total PRS households in Scotland, urban sites currently considering BTR, Scotland BTR schemes of 12 units or more need to increase to 2.6% (from 1.8% last year). This figure may get closer to English BTR levels. In terms of tenant and landlord rights, the make provision for 25% affordable units. After still lags the UK as a whole, where the BTR pipeline Scottish PRS is now a different place than negotiations with the local Council (which accounts for around 3.4% of PRS households. before the new legislation was enacted in Rettie & Co played a full part in on behalf of This said, London is a key driver of this figure, December 2017. For example, tenancies clients), there now appears to be clarity that with BTR accounting for around 7.4% of PRS have no end date but tenants can terminate such affordable units can be provided at households. Outside London, the figure is 2.3% tenancies with 28 days’ notice; there is no intermediate rent (i.e. at the 30% percentile of and now broadly in line with Scotland’s overall BTR Pipeline as % of PRS Households “no fault possession” now and landlords/ the Broad Rental Market Area). Edinburgh also figure. owners must enact a number of mandatory has its own wider BTR guidance and its latest or discretionary grounds to take possession Choices document discusses other possible In Scotland, BTR is mainly concentrated in the of a property; rents can only be raised once planning changes, including raising affordable two major cities of Edinburgh and Glasgow, with per year; and there is a possibility of any local contributions from developers to 35% of units. 80% of the national pipeline in these two centres. authority in Scotland requesting powers to Glasgow has no similar affordable housing With 3,217 BTR units in the pipeline in Edinburgh, become a Rent Pressure Zone (RPZ) and policy but has its own residential strategy with this equates to around 5.2% of PRS households. control rent rises in all or part of their area. which BTR provision will need to align. If Edinburgh was delivering at a similar rate as 2.6% Knowing the politics in Scotland and likely London, the pipeline would be expected to be As a response to the Covid-19 pandemic, changes is vital to informing schemes. around 4,400 households. there have been further legislative changes. The Coronavirus (Scotland) Bill was passed on Glasgow has a larger population than Edinburgh 3.4% the 1st April. This legislation is temporary and but a similar number of PRS households. With will expire on 30th September 2020, subject to a pipeline of almost 4,500 units, the role of BTR extension, but, while it is in effect, mandatory in the PRS is currently more significant here, grounds for possession are now discretionary. with the pipeline representing around 7.5% of This means that a tenant may only be evicted PRS households and now around London levels. 7.4% if the First-tier Tribunal finds the application While Glasgow is leading the way in Scotland, if submitted by the landlord to be reasonable to comparable levels of BTR delivery in the UK were justify eviction. It should be noted that First-tier happening in Scotland, the current pipeline of Tribunal hearings have been postponed to 9th almost 9,000 units should be nearer 12,000 units. July 2020, subject to review and may be further postponed. A future trend, which is already established south of the border, and was signalled by Sigma There have also been attempts to introduce PRS Management Ltd’s deal with Springfield other measures, for example the MSP Andy Properties PLC, is the growth of suburban Wightman brought forward a Bill amendment BTR in Scotland. Suburban BTR makes a for a two-year rent freeze across the PRS in compelling investment case. Low turnover and Scotland and a ban on evictions resulting from low operational cost; reliable occupancy and rent arrears during the crisis. This was defeated revenue streams; and more available, less prime in Parliament after it failed to win Government product compared to the urban flatted market support but did have a lot of parliamentary are all factors driving suburban BTR investment. support. There remains an ongoing campaign Analysis from England suggests that just under to introduce rent controls. The Labour MSP Dr John Boyle 30% of operating BTR schemes could fit a Andrew Meehan Director, Research and Strategy Pauline McNeill has brought forward a Bill to suburban profile. Associate Director Research Rettie & Co. more directly introduce measures to limit rent Rettie & Co.

RETTIE & CO. 19 COVID-19: MAINTENANCE DURING THE LOCKDOWN

Across the property sector, all experiencing the For all our attending contractors I have maintained effects of the global pandemic that is Covid-19 in regular communication to ensure that they were Deposit Free & Rent Passports different ways. As Residential Services Manager still able to provide the required service during the Rettie & Co. is working exclusively with Canopy in Scotland, for the Build to Rent team for Rettie & Co, one of lockdown period, confirming that they have PPE which provides an improved referencing experience for the challenges I have faced is to continue to offer equipment and they themselves were also not prospective renters and more robust checks for landlords, residents the best possible service in the face of showing any symptoms of Covid-19. relative to traditional referencing, with enhanced income practical challenges and lockdown restrictions. verification/affordability checks and added legal/regulatory Going forward, as we look to move out of the warnings, politically exposed person checks and international Since the lockdown, I have modified our lockdown, all contractors are required by law sanctions checks. maintenance reporting platform to include to complete a Risk Assessment and will not Covid-19 specific questions to ensure that be allowed to attend any properties until this is All applicants are invited to complete a ‘RentPassportTM’, residents and contractors alike feel safe when completed and returned to Rettie & Co. As we with built-in eligibility criteria, which means they can be pre- attending to any maintenance issues. I have progress through the lockdown, I will continue to approved prior to allocation of a home. The ‘RentPassportTM’ also utilized the residents’ portal to keep rental ensure ongoing communication with residents also enables anyone renting to add their rental payments to clients up to date with the services that we so they always feel safe whilst maintenance is their credit history. Renters can also be given the option of are continuing to provide whilst the lockdown undertaken in their home. a ‘DepositFreeTM’ insurance policy (backed by Hiscox) as an restrictions are in place. alternative to a cash deposit. Due to the restrictions, I have been arranging emergency and essential repairs only; this is to “For all our attending contractors reduce the amount of movement, risk and access I have maintained regular requirements to residents’ homes. I have found, Resident Portals communication to ensure that they almost across the board, that residents have Engage allows us to deliver bespoke, uniquely branded, online a taken a pragmatic approach to the lockdown were still able to provide the required residents’ portals for each of our developments. These are and the reporting of maintenance issues. Whilst service during the lockdown period...” designed to enhance communication and customer service for emergency repairs are still being reported at pre residents, with the efficiency of interfacing with the Qube Living Covid-19 levels, I have seen a steady decline in property management software. It provides: non-essential repairs being reported. · facility to report repairs & maintenance For any emergency maintenance issues reported, · ability to make online payments & retrieve tenancy documents the key focus it to get as much information · information on the home (such as user manuals, hints & tips) as possible about the issue the resident is · information on the local neighbourhood experiencing, and also to ensure that they are not · news (updates from us) shielding or self-isolating, therefore mitigating · forums (for use between all residents within a community) any risk to both the resident and the contractor. · offers (from local businesses) Once I have opened a dialogue with the resident, I · feedback forms can then ensure that the contractor has as much information as possible prior to attending. This also limits the chain of face-to-face contact. When arranging essential maintenance such as any Gas Safety, PAT & Legionella certificates, Back Office Management & Reporting which are still required by law, I have used a QUBE Living is a back-office letting and property management flexible and empathetic approach with residents platform, used by many BTR players south of the border. It by maintaining an open dialogue and mutually supports the holistic management of our BTR developments. agreeing access arrangements that they feel Carrie Wilson Amongst its many benefits is its powerful reporting suite, with comfortable with. Resident Services Manager Rettie & Co. over 400 industry-standard reports to choose from and an in-built custom report writing tool. This allows us to monitor and analyse portfolio performance at the touch of a button, and provides the capability to produce bespoke reports to meet our clients’ objectives and requirements.

21 PfP CAPITAL UPDATE

PfP Capital MMR Fund Secures Pipeline of 855 Affordable Homes Affordable homes provider PfP Abbotsway Royston Road “We are delighted to announce these Capital have now secured 8 sites new acquisitions across Edinburgh across Scotland for the delivery of Developer: Keepmoat Developer: Swan Group and Glasgow, working with a range of 855 mid-rent homes. The fund is delivery partners. We continue to see now operating a portfolio of new Location: Paisley Location: Glasgow mid-market rent as a means of rapidly homes at Abbotsway in Paisley, Units: 66 New Homes Units: 100 New Homes increasing the availability of good quality with further homes currently under homes available to a large proportion construction. The total value of the of Scottish households. Given the pipeline secured now amounts to uncertain outlook, the requirement c. £135m. The initial fund target for professionally-managed stock with of 1,000 homes will bring the total security of tenure is more relevant value of the fund to around £160m, than ever, and is something we are with sites acquired on both a committed to delivering.” forward fund and forward commit basis. Green Niddrie Mains Road William Kyle Fund Director The 30-year fund is backed by Developer: Hopefield Partnership Developer: Places for People PFP Capital a £47.5m Scottish Government Location: Edinburgh Location: Edinburgh loan, and is seeking long-term CPI-linked returns along with Units: 85 New Homes Units: 136 New Homes capital growth. Rettie & Co. advised on the acquisition of these sites “These acquisitions demonstrate the and continues to review site scale of the underlying opportunity opportunities which meet the within the mid-rent sector across fund requirements. A range of low Scotland, and how new capital can be density apartments and family introduced to help address our housing homes will be included within the shortage. Covid-19 has revealed the pipeline. PfP Capital are currently resilience of this sector versus other working with a range of developers. Millerhill, Shawfair Salamander Place asset classes through delivering stable occupier demand. The mid-rent Developer: Mactaggart & Mickel Developer: Cruden approach can also provide certainty to Location: Edinburgh Location: Edinburgh housebuilders during what is expected Units: 151 New Homes to be a turbulent period within the Units: 43 New Homes private for-sale market. We continue For more information contact: to seek site opportunities on behalf of PfP Capital to deliver more high quality, affordable homes.” Matthew Benson Development Services Director Rettie & Co. Maxwell Road The Wisp Developer: New City Vision Developer: Springfield Location: Glasgow Location: Edinburgh Units: 170 New Homes Units: 104 New Homes

Kenneth Reid Development Services Associate 0131 603 8356 [email protected]

RETTIE & CO. 23 Rettie & Co. Build to Rent Services

COLLABORATION DESIGN & LAYOUT • Best Supporting Organisation 2018 – HfS Awards. • Development of the design brief with a clear focus • CIH Award Finalist – Excellence in the Private Sector. on the end-user. • Complementing in-house teams. • Advice on the specification of the amenities the • Working with you – no rigid formulaic approach. project should offer (eg. games rooms, gyms, co- • White-labelling as required. working spaces etc). LEASE UP • Brand development and marketing. VIABILITY • Dynamic pricing to maximise initial revenue. • Rental, yield and return analysis. • Applicant vetting, referencing and tenant • Rental growth and tenancy duration forecasting. selection. • Strategic marketing to target suitable residents. • Forecasting operating budget, lifecycle costs and • Ongoing demographic profiling and reporting. gross-to-net leakage. • Ongoing competitor benchmarking. • Detailed socio-demographic analysis of target consumers. • Analysis of competing supply pipeline both in MANAGEMENT traditional and purpose built BTR. • Holistic management of individual units, amenity space and communal parts. • Recruitment, training and management of on-site staff. • Resident satisfaction measurement and reporting. FUNDING • Reputational risk management. • Winner of Saltire Award for Financial Innovation. • Health and Safety compliance management. • Our team has a successful track record in • Detailed revenue accounting and credit control. structured finance in the Scottish market, with over 654 BTR homes developed on behalf of clients. ASSET OPTIMISATION • Insurance management. • Cyclical maintenance planning. • Capital investment forecasting. SITE ACQUISITION • Modelling and reporting of lifecycle costs. • Site sourcing / acquisition. • Land values. EXIT STRATEGY • Granular market knowledge. • Market assessment. • We have the expertise and market knowledge • Viability assessment and scenario modelling. to identify and secure sites appropriate for BTR • Private client access. product. • Yield analysis. • Sale/acquisition. Build to Rent Team

Gillian McLees Matthew Benson Dr John Boyle Karen Turner Sandy Gilmour Director of BTR Director Development Services Director Research & Strategy Director of Lettings Associate Director Land & Dev 0131 202 6199 0131 624 9031 0131 624 4073 0131 624 9065 0131 603 8350 [email protected] [email protected] [email protected] [email protected] [email protected]

Andrew Meehan Grace Reilly Kenneth Reid Sharon Ross Carrie Wilson Associate Director Research Glasgow Lettings Manager Development Services BTR Portfolio Manager Resident Services Manager 0131 624 9051 0141 223 7887 0131 603 8356 0131 622 4160 0131 202 6929 [email protected] [email protected] [email protected] [email protected] [email protected]